Amid ongoing Daily Fantasy Sports (DFS) scrutiny across the United States, Missouri lawmakers have passed a bill to legalize and regulate the industry. On Thursday, May 12, 2016, the Missouri House of Representatives signed onto the Missouri Senate’s version of the bill titled “Missouri Fantasy Sports Consumer Protection Act,” HB 1941, which now awaits approval by Governor Jay Nixon.
Under the bill, DFS will be exempt from existing gambling law, regulated by the Missouri Gaming Commission, but operators will be required to obtain state licenses. Operators, such as DraftKings Inc. and FanDuel Inc., must meet the state’s regulations, which include an annual fee of $10,000 or 10 percent of the operator’s previous year’s net revenue, or face the possibility of license suspension or revocation. Additionally, the online contests will be limited to those 18 years or older.
Missouri Governor Nixon is expected to sign the bill after previously calling for state regulation and taxation of the popular online gambling games in order to protect vulnerable citizens. The state stands to realize an estimated $10 million revenue stream, which Governor Nixon would like to see used for the state’s education system. Senate Minority Leader, Joe Keaveny, sponsored the legislation in an effort “to regulate an industry that has previously not been regulated.” The industry claims to have four million online accounts in the state, giving lawmakers justification for state oversight.
Currently, state regulation in the industry has been slow to gain traction. Indiana, Virginia, Tennessee, and, most recently, Mississippi have enacted legislation similar to Missouri’s, while Colorado waits for its governor to sign off on the legislation and Massachusetts’ attorney General, Maura Healey, published DFS industry regulations. Other states, however, remain cautious about DFS operations, citing current gambling law and tribal relationships. Three states critical to the DFS industry, New York, California, and Illinois, remain without a legislative solution, preventing full legal clarity on the topic. DraftKings and FanDuel faced illegal gambling lawsuits in New York, which are currently on hold in an attempt to legalize the industry across the state.
Congress is also considering its role in the industry. On May 11, 2016, members of the U.S. House of Representatives Committee on Energy and Commerce met with members of the DFS industry. The hearing, labeled “Daily Fantasy Sports: Issues and Perspectives,” sought to educate lawmakers on fantasy sports in an effort to clarify whether the industry should be regulated by the federal government. A recent study, completed by the Competitive Enterprise Institute (CEI), suggests that states and localities are best suited to regulate online gambling.
The CEI study advocates minimal regulations that are primarily focused on protecting vulnerable gamblers against fraud. The report finds, “It should remain a state-level responsibility, without additional federal oversight beyond enforcement of existing federal laws that apply to all other businesses, such a tax responsibility, antitrust rules, and other economic regulations.” Opponents to the regulations have cited onerous rules and taxes that DFS operators face. Additionally, small DFS businesses are concerned that the legislation is intended to create a duopoly, bolstering only FanDuel and DraftKings in the state.
As most state legislative sessions head for recess, lawmakers have to move swiftly for enactment to be possible. New York’s history of vetting bills behind closed doors makes it possible for legislation to be enacted before the session adjourns on June 16, 2016. If in the next few weeks New York joins other states in supporting DFS, the industry is betting further states will follow suit.